French PM offers debt relief for railway shakeup

PARIS (Reuters) - The French government, seeking to end a rail strike over one of President Emmanuel Macron’s flagship reforms, said on Friday it would erase most of the SNCF rail company’s debt if plans to make the operator more cost-effective were implemented.

FILE PHOTO: A logo is seen on a TGV high-speed train at Montparnasse railway station during a nationwide strike by French SNCF railway workers in Paris, France, April 29, 2018. REUTERS/Christian Hartmann/File Photo

It remains to be seen whether unions will back the offer made by Prime Minister Edouard Philippe. A vote is expected in the coming weeks.

If the offer is rejected and the strike continues, it will underscore the deep resentment that persists among more left-wing unions against Macron’s ambitious agenda.

The 40-year-old, who liberalized French coach bus travel and Sunday trading in a former post as a minister, has eased labor protections since taking office a year ago. He has also scrapped a wealth tax, saying the move was needed to spur growth, earning the moniker “president of the rich”.

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Laying out the government’s offer, Philippe said the state would absorb 35 billion euros of the SNCF’s total 47 billion euros ($55 billion) debt pile mostly generated by investment in the much-admired TGV high-speed train network.

“This will relieve the SNCF of most of its debt and give it the financial room for maneuver it needs for the future,” the prime minister said.

It involves wiping 25 billion from SNCF books in 2020 and another 10 billion in 2022. That would ease the load on the railways, but only by moving it to an area of state liabilities that still has to be footed by the taxpayer.

The offer goes some way towards the demands of more moderate unions involved in a strike that has reduced trains services by about 50 percent for much of the past two months.

The moderates, primarily the CFDT and Unsa unions, welcomed the concession, saying it showed it was worth negotiating.

FILE PHOTO: French Prime Minister Edouard Philippe leaves a press conference with Justice Minister Nicole Belloubet (not pictured) to present a proposed constitutional bill that the government aims to modernize the French democracy, at the Elysee Palace in Paris, France, May 9, 2018. Francois Mori/Pool via Reuters

The CGT, another influential union but one which is opposed to EU-wide liberalization in principle, said it saw no reason for now to call off a strike that began in early April.

“The conflict goes on,” said CGT rail union boss Laurent Brun.

The reform, the biggest since nationalization in 1937, seeks to reduce costs and end hiring of rail staff - currently 150,000 - on more protective contracts than other sectors. SNCF management has to find 30 percent cuts in operating costs.

Opinion polls show a majority of voters back a reform which Macron says is key to SNCF survival when EU-wide liberalization ends its monopoly of domestic passenger rail from end-2020.

An adviser to Macron said on Friday that taking on the SNCF debt, which is bigger than France’s annual defense budget, would raise public sector debt but not undo a commitment to keep the deficit within the EU-agreed ceiling of 3 percent of GDP.